Saudi Arabia is next battleground for e-commerce titans

Shoppers take a stroll through Riyadh's Kingdom Centre Shopping Mall. The Kingdom is being targeted by global e-commerce corporations. (Getty Images)
Updated 18 May 2018

Saudi Arabia is next battleground for e-commerce titans

  • KSA online sales expected to surge to $13.9 billion by 2021
  • Overall GCC e-commerce to grow to $24 billion by end of decade

The battle for Saudi Arabia’s online shoppers is on.

One year on from the Amazon-Souq deal, the Kingdom's youthful population is being increasingly targeted by the region's burgeoning e-commerce industry.

With the largest economy in the GCC and the youngest Internet-connected population in the world, the Kingdom represents a golden goose for the world’s online retail players.

Online sales in Saudi Arabia are expected to surge to $13.9 billion by 2021 from about $8.7 billion in 2017, according to market researcher BMI.

The overall GCC e-commerce market is now tipped to grow to $24 billion by the end of the decade, say management consultancy A.T. Kearney.

UAE-born Souq.com, which was acquired by Amazon in 2017, has already built up a following and brand relationships in Saudi Arabia since its launch in 2005.
After months of delays, Noon.com also launched in the Saudi market in December last year, after starting up in the UAE earlier in the year.

Investors in Noon.com, including Emaar chairman Mohamed Alabbar and Saudi Arabia’s sovereign wealth fund, have put $1 billion into the project.

Saudi Arabia offers great scope for retail players looking to expand said Sam Blatteis, CEO of The MENA Catalysts and ex-Google head of Gulf government affairs.

As he puts it: “The Kingdom’s population has already expanded 50 percent since the start of the millennium, and has the highest YouTube and Twitter usage on earth. At this point, the pace of change has never been this fast, and yet it will never be this slow again.”

He said: “Tech titans from the world’s two largest economies – China and Silicon Valley – are signaling they plan to expand in Saudi Arabia. The Kingdom’s 2030 vision is only 12 years away and Saudi’s ‘Generation Y’ leadership is increasingly running the country. They are moving mountains to overhaul strategic industries from transportation to education legalizing ride-hailing apps to rolling out coding classes in schools nationally.”

As competition heats up in the marketplace and more players join the fray, trends will lean to specialization, said Monica Peart, senior forecasting director at E-Marketer.

“As more local e-commerce players arrive on the scene, you will start to see price competition and product competition. They will start to specialize, which will engender even more e-commerce activity,” added Peart.

But for e-commerce to really take off in Saudi Arabia and the wider GCC, shoppers “must be able to find better goods online than on the local shelves," said Peart.

She added: "For this scenario to become a reality, the region will need to ramp up its last-mile services, time-to-delivery, online ranges and its choice of payment gateways."

According to Walid Mansour, managing partner at Middle East Venture Partners (MEVP), which has investment in several e-commerce related ventures, including last-mile delivery company One Click, “e-commerce is growing at a very fast pace but faces challenges.”

Mansour highlights lack of data analytics as a key hindrance to the market. “What’s needed to boost the online commerce market is data, including predictive data, which leads to insights for actions, as well as automated marketing services,” he said. “But of course, there are a lot of (e-commerce) players in the market now, which means there is a lot of growth potential. The market is getting better … but it’s not there yet.”


Saudi Arabia opens new logistics zone in Jeddah

Updated 13 October 2019

Saudi Arabia opens new logistics zone in Jeddah

  • The Al-Khomra zone extends over 2.3m square meters in Jeddah
  • It will support activities around shipping, freight distribution and transport of goods

RIYADH: Saudi Arabia launched on Sunday a new logistics zone open to private investors in the Red Sea port city of Jeddah, as part of a wider industrial initiative to diversify the economy away from oil and create jobs for Saudis.
The Al-Khomra zone — which will support activities around shipping, freight distribution and transport of goods — extends over 2.3 million square meters in Jeddah, home to one of the Kingdom’s largest ports.
As the biggest logistics zone in the country, it hopes to turn Saudi Arabia into a global logistics hub and create 10,000 direct jobs, said Minister of Transport Nabeel Al-Amudi.
It is part of the broader National Industrial Development and Logistics Program (NIDLP), which aims to create 1.6 million jobs and attract investments worth SR 1.6 trillion ($427 billion) over the next decade. Of that, SR 135 billion is earmarked for investment in the logistics sector.
Under its ambitious reform strategy, the Kingdom plans to have the private sector operate much of its transport infrastructure, including airports and sea ports, with the government keeping a role as regulator.
Details of what the government plans to offer investors in Al-Khomra were not disclosed, but the Saudi Ports Authority  (Mawani) said the zone would offer opportunities to investors on a lease basis.
“Investment in the logistics zone in Al-Khomra and other ports will total SR 7 billion,” said Saad Al-Khalb, president of the Saudi Ports Authority.
Al-Khomra joins other logistics zones in the `kingdom — the King Abdullah Economic City north of Jeddah has its own port and offers logistics investments and NEOM, a mega project announced in 2017, has plans for a logistics zone.
Over a decade ago, the Saudi government spent $30 billion to build six economic cities across the Kingdom to diversify the economy, create jobs for young Saudis and attract foreign investment, though many of the projects have failed to achieve expected results.
After decades of spending on development projects, the government has made attracting greater foreign investment a cornerstone of its Vision 2030 plan.